20-F: BBVA Reports Strong 2025 Profit Growth Amidst Market Shifts

BBVA announced a 4.5% increase in profit attributable to the parent company, reaching €10,511 million in 2025, driven by robust net interest income and strategic digital investments.

Summary

• Profit attributable to the parent company increased by 4.5% to €10,511 million in 2025, up from €10,054 million in 2024.
• Net interest income grew by 4.0% to €26,280 million in 2025, compared to €25,267 million in 2024, primarily due to higher volumes and customer spreads.
• Gross income increased by 4.1% to €36,931 million in 2025.
• Total assets expanded by 11.3% to €859,576 million in 2025, from €772,402 million in 2024.
• Customer deposits grew by 12.2% to €502,501 million in 2025.
• The fully loaded Common Equity Tier 1 (CET1) ratio decreased by 18 basis points to 12.70% in 2025, mainly due to a share buyback program and risk-weighted asset (RWA) growth, partially offset by earnings generation and regulatory impacts.
• The total capital ratio increased to 17.21% in 2025.
• The non-performing loan (NPL) ratio improved in Spain (3.0% from 3.7%), South America (4.0% from 4.5%), and Rest of Business (0.2% from 0.3%), remained stable in Mexico (2.7%), but deteriorated in Turkey (3.9% from 3.1%).
• Net loan charge-offs to average loans at amortized cost ratio increased to 0.91% in 2025 from 0.87% in 2024.
• BBVA completed a €993 million share buyback program and announced a new framework program for €3,960 million, with a first tranche of €1,500 million already underway.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with solid profit growth, robust net interest income, and healthy balance sheet expansion. While some regional NPL deterioration and a slight dip in CET1 are noted, the overall financial health, strong liquidity, and proactive capital management, including significant share buybacks, indicate a positive outlook.

Positives

• Profit attributable to the parent company increased by 4.5% to €10,511 million in 2025.
• Net interest income grew by 4.0% to €26,280 million, driven by higher volumes and customer spreads in several regions.
• Gross income increased by 4.1% to €36,931 million.
• Total assets expanded by 11.3% to €859,576 million.
• Customer deposits grew by 12.2% to €502,501 million.
• Liquidity Coverage Ratio (LCR) stood at 143% and Net Stable Funding Ratio (NSFR) at 126%, both well above the 100% regulatory minimums.
• MREL requirements were met, with MREL in RWAs at 28.89% (vs. 23.13% requirement) and MREL in LR at 10.21% (vs. 8.59% requirement).
• NPL ratios improved in Spain (3.0% from 3.7%), South America (4.0% from 4.5%), and Rest of Business (0.2% from 0.3%).
• NPL coverage ratios improved across most segments: Spain (67% from 59%), Mexico (124% from 121%), South America (92% from 88%), and Rest of Business (173% from 102%).
• Successful completion of a €993 million share buyback program and announcement of a new, larger €3,960 million program, signaling confidence in capital generation.
• Positive performance of ALCO portfolios in 2025.
• The Spanish stock market was among the strongest performers in Europe, driven by the financial sector.

Negatives

• The fully loaded CET1 ratio decreased by 18 basis points to 12.70% in 2025, primarily due to the share buyback program and RWA growth.
• Net loan charge-offs to average loans at amortized cost ratio increased to 0.91% from 0.87%, driven by higher charge-offs in Mexico and Argentina.
• The NPL ratio in Turkey deteriorated to 3.9% from 3.1%, mainly due to increased non-performing retail loans and lower repayment capacity.
• The NPL coverage ratio in Turkey decreased to 76% from 96%, due to new Stage 3 entries and lower wholesale portfolio requirements.
• Depreciation of the Turkish lira and Argentine peso against the euro negatively impacted results from foreign operations.
• Higher credit impairment requirements in Mexico's retail portfolio due to a worsening macroeconomic scenario.
• Increased administration costs in Turkey and Mexico, largely driven by high inflation and personnel expenses.
• The Corporate Center recorded a loss from foreign exchange hedging, particularly with the Mexican peso, and lower gains on certain U.S. bonds due to U.S. dollar depreciation.
• Increased provisions for contingent risks in Turkey and Mexico.
• Higher loss on the net monetary position in Venezuela, amounting to €183 million in 2025 compared to €9 million in 2024.

Risks

• Deterioration of economic or political conditions in Spain, Mexico, and Turkey could materially adversely affect business, financial condition, and results of operations.
• Uncertainty surrounding U.S. administration policies (tariffs, fiscal/regulatory changes) could increase U.S. risk premium, weaken the USD, and spark market instability.
• Geopolitical tensions (Ukraine, Middle East, U.S.-China rivalry, Latin America, Iran, Greenland crisis) increase uncertainty and likelihood of economic/financial disruptions, including recession.
• Inflationary pressures and stagflation triggered by supply shocks or sharp rises in oil and gas prices pose a risk.
• Exchange rate volatility, particularly the depreciation of non-euro currencies (Turkish lira, Argentine peso, Mexican peso, U.S. dollar), can negatively impact results.
• Adverse developments in real estate markets in Spain, Mexico, and Turkey could reduce collateral values and increase default rates.
• Changes in the institutional environment could lead to sudden GDP contractions, capital controls, dividend restrictions, or new taxes/levies.
• High public debt or external deficits could lead to sovereign credit rating downgrades or defaults.
• Interventionist actions by the United States in some South American countries constitute a significant source of risk.
• The Group is vulnerable to adverse changes in counterparties' credit quality and the value of collateral, which could increase write-downs and loss allowances.
• The business is particularly vulnerable to interest rate changes, affecting net interest income, credit demand, funding costs, and default rates.
• Increasing competition from non-bank digital financial services providers (neobanks, FinTechs, BigTechs) could erode market share and necessitate substantial investments.
• Challenges in adapting to and capturing benefits from emerging technologies (AI, cloud computing, big data, cryptocurrencies, alternative payment systems) could adversely affect competitiveness.
• International geographic diversification exposes the Group to heightened political risks, currency risk, and limitations on dividend repatriation in emerging countries.
• Higher anti-money laundering (AML) and environmental, social, and governance (ESG) risk levels are present in emerging economies.
• Acquisitions and divestitures carry risks of integration difficulties, unforeseen liabilities, and failure to achieve expected results.
• Asset impairment (including goodwill and deferred tax assets) could materially affect earnings and financial condition.
• Liquidity risk from unexpected withdrawal of deposits or other funding sources could force higher financial costs or asset liquidation.
• Dependence on credit ratings and sovereign credit ratings (Spain, Mexico, Turkey) means downgrades could limit market access and increase financing costs.
• Substantial unfunded commitments with personnel (pensions, post-employment benefits) pose liquidity risk.
• The Group is party to numerous legal and regulatory actions and proceedings (antitrust, consumer protection, criminal investigations), with potential for significant penalties, damages, and reputational harm.
• The Spanish judicial authorities are conducting a criminal investigation related to possible bribery and revelation of secrets by BBVA, with unpredictable outcomes.
• The complex and evolving regulatory framework (capital, liquidity, resolution, consumer protection, AML, tax) increases operating expenses and compliance costs.
• Resolution regulations (BRRD, SRM Regulation) could lead to bail-in measures, including write-down or conversion of debt.
• Increasingly onerous capital and liquidity requirements (Pillar 1, Pillar 2, MREL, leverage ratio, Basel III reforms) could limit discretionary payments or require additional capital.
• Exposure to tax risks, including increases in tax rates and new taxes/levies (e.g., IMIC in Spain), could adversely affect financial results.
• Compliance risks (customer conduct, antitrust, AML, sanctions, anti-corruption, data protection) could lead to penalties and reputational damage.
• Financial statements rely on assumptions and estimates which, if inaccurate, could lead to material misstatement.
• Attacks, failures, or deficiencies in IT systems and security (cyber-attacks, data theft, fraud) could lead to financial losses, data breaches, operational disruption, and reputational harm.
• Increased cybersecurity risks due to digital strategy, AI use, and quantum computing advancements.
• Reliance on third-party service providers exposes the Group to their operational and cybersecurity risks.
• Model risk from deficiencies in the design, implementation, use, or interpretation of internal models.

Future Outlook

BBVA Research projects global growth at 3.1% in 2026, with mild deceleration in major economies. The Federal Reserve is expected to continue gradual interest rate cuts, while ECB policy rates are projected to remain unchanged. In Spain, GDP growth is expected to moderate to 2.4% with easing inflation. Mexico's GDP growth is projected at 1.2%, with gradual interest rate cuts. Turkey's GDP growth is expected to rise to 4.0%, with inflation and interest rates continuing to decline. The European financial services sector is anticipated to remain competitive, influenced by positive interest rates, increasing competition from digital providers, ongoing regulatory reforms, and evolving ESG matters. Profitability in Turkey is expected to be more pronounced in 2026 due to improving net interest margin, supported by banking fees and commissions, though credit risk costs may limit further improvement.

Management Comments

• BBVA places sustainability at the core of its strategy.
• The Group is committed to offering a compelling digital proposition focused on customer experience.
• The Group is working on its estimation models so that they consider and reflect how climate risk and other climate-related matters can affect the consolidated financial statements, cash flows and financial performance of the Group.
• BBVA's capital management is also part of the most relevant forward-looking strategic decisions in the Group's management and monitoring, which include the Budget and the Liquidity and Funding Plan, with which it is coordinated all with the aim of achieving the Group's overall strategy.
• BBVA maintains active management policies for its main investments in emerging countries with the objective of achieving, on average, a hedging level of between 40% and 50% of the aggregate attributable profit in non-euro currencies that the Group expects to generate over the next twelve months; and between 50% and 70% of the aggregate excess capital in non-euro currencies within CET1.

Industry Context

StockSavvy.ai notes that the global financial services sector continues its significant transformation driven by digital innovation, leading to increased competition from non-bank players like FinTechs and BigTechs. This trend is forcing traditional banks like BBVA to invest heavily in digital capabilities and adapt their business models, while also navigating regulatory asymmetries that often favor newer entrants. The ongoing geopolitical tensions and macroeconomic uncertainties, including inflation and central bank policies, are creating a complex operating environment, particularly impacting banks with significant exposure to emerging markets. The increasing focus on ESG factors is also shaping industry practices, requiring banks to integrate sustainability into their risk management and product offerings.

Comparison to Industry Standards

• BBVA's strong liquidity ratios (LCR 143%, NSFR 126%) are well above the 100% regulatory minimums, indicating a robust liquidity position compared to global benchmarks.
• BBVA's MREL ratios (28.89% in RWAs vs. 23.13% required; 10.21% in LR vs. 8.59% required) demonstrate strong compliance with resolution requirements, positioning it favorably against peers subject to similar stringent standards.
• The NPL ratio improvements in Spain, South America, and Rest of Business suggest effective credit risk management in these regions, potentially outperforming some regional competitors facing similar economic headwinds. However, the deterioration in Turkey's NPL ratio indicates a localized challenge that may require closer monitoring compared to more stable markets.
• The increase in net loan charge-offs to average loans at amortized cost (0.91% from 0.87%) suggests a slight uptick in credit quality concerns, which could be a broader industry trend in certain segments or geographies, but warrants comparison with specific peer performance.
• The emphasis on digital transformation and AI investment aligns with leading global banks, such as JPMorgan Chase and Bank of America, which are also heavily investing in these areas to enhance customer experience and operational efficiency.

Management Changes

Corporate Governance

Legal Proceedings

• BBVA is involved in government procedures and investigations, including an antitrust investigation by the Mexican Federal Economic Competition Commission regarding the card payments market.
• An ongoing class action lawsuit in the U.S. District Court for the Southern District of New York alleges collusion in Mexican government bonds; a motion to dismiss was denied on January 15, 2025, and the case is ongoing.
• Spanish judicial authorities are conducting a criminal investigation (Preliminary Proceeding No. 96/2017) into possible bribery and revelation of secrets by BBVA, with an order issued on June 20, 2024, authorizing continuation of abbreviated criminal proceedings against BBVA and certain current/former employees/directors.
• Claims are pending before Spanish courts challenging the validity of certain revolving credit card agreements, with potential industry-wide implications.
• As of December 31, 2025, the Group had €805 million in provisions for ongoing legal proceedings and arbitrations.

Related Party Transactions

• BBVA entities engage in customary transactions with other BBVA entities (e.g., overnight call deposits, time deposits, foreign exchange, derivatives) in the ordinary course of business.
• Transactions with shareholders, employees, associates, and family members are conducted on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons, and do not involve more than normal risk.
• Balances with joint ventures and associates as of December 31, 2025, include loans and advances to customers of €632 million, financial guarantees given of €100 million, and other commitments given of €625 million.
• Loans and credits with members of the Board of Directors amounted to €1,741 thousand in 2025.
• Loans and credits with Senior Management (excluding executive directors) amounted to €5,285 thousand in 2025.

Stakeholder Impact

• Shareholders are impacted by the dividend policy, share buyback programs, and potential dilution from convertible securities, as well as the overall financial performance and exposure to legal and regulatory risks.
• Employees are affected by pension commitments, remuneration policies, and potential disciplinary actions for non-compliance with conduct policies. New hires in transformation areas indicate growth opportunities.
• Customers are impacted by changes in product offerings, digital transformation initiatives, consumer protection regulations, and potential outcomes of litigation related to financial products.
• Regulators face increased scrutiny and new regulations (e.g., DORA, AML/CFT, IMIC) which require significant compliance efforts and resource allocation from BBVA.
• Creditors are affected by MREL requirements, the subordination of certain debt instruments, and the potential exercise of bail-in power by resolution authorities.

Next Steps

• Annual General Shareholders Meeting to be held on March 20, 2026, to vote on director re-elections and a new director appointment.
• Annual General Shareholders Meeting to be held on March 20, 2026, to vote on a proposal to authorize the Board of Directors to issue convertible securities.
• Annual General Shareholders Meeting to be held on March 20, 2026, to vote on a proposal to approve a reduction of BBVA's share capital by up to 10%.
• Proposed cash distribution of €0.60 gross per share as final dividend for 2025, expected to be paid in April 2026.
• Execution of the first tranche of the €3,960 million share buyback program is ongoing.
• Transposition of the Consumer Credit Directive 2023/2225 into Spanish market expected to enter into force on November 20, 2026.
• IFRS 18 'Presentation and Disclosures in Financial Statements' and IFRS 19 'Subsidiaries without Public Accountability: Disclosures' to come into force on January 1, 2027.
• EU securities settlement cycle to shorten from T+2 to T+1 under CSDR from October 11, 2027.
• AML/CFT Regulation and 6th AML/CFT Directive to apply from July 10, 2027.
• BBVA stock options awarded as part of 2025 deferred annual variable remuneration to executive directors and Senior Management will vest on February 15, 2028.
• Expiration date for BBVA stock options awarded as part of 2025 deferred annual variable remuneration is February 15, 2030.
• The Group will continue working to incorporate available information into models for climate risk and other climate-related matters.
• The CBRT in Turkey is expected to maintain the policy framework designed to prioritize Turkish lira-denominated deposits and a long-term maturity structure for external funding.
• Limits for loan growth and exceptions in Turkey are expected to be revised throughout 2026.

Key Dates

Recommendation

BBVA demonstrates solid financial performance with growth in key metrics and strong liquidity. However, the slight decrease in CET1, increased loan charge-offs, and NPL deterioration in Turkey, coupled with ongoing significant legal and regulatory uncertainties, suggest a cautious approach. The new share buyback program is positive, but the overall environment warrants a 'Hold' as the company navigates these challenges.

Keywords

Banking, Financial Services, BBVA, Spain, Mexico, Turkey, South America, Net Interest Income, Profit, Capital Ratios, CET1, MREL, NPL, Liquidity, Share Buyback, Digital Transformation, ESG, Cybersecurity, Market Risk, Credit Risk, Regulatory Risk, Geopolitical Risk, Hyperinflation, SEC Filing, Annual Report